Friday, July 16, 2010

New Ownership Insights

As many of my 5 fans know by now, I am no fan of the work of our ownership, our management (even though I blame ownership more), and our coaching staff (even though I blame ownership for the coaching situation).

That's pretty clear, but I do want to highlight a few things that the recent sale of the Golden State Warriors tells us and some are bad and some are great.

So, first, the good:
  • It's important to note that a team purchased for $119M in 1995 just was sold for $450M in 2010 during a recession. Which means you'd have to lose over $20M a year for 15 years in order to NOT make money over the duration of the this ownership period. That doesn't include the tax savings you get for claiming the loss that happens each year over the 15 years. Golden State has never been one of the best teams in the NBA. This deal did not include a hockey team or an arena. Get where I'm going with this? Yes, this means that as much as we discuss the fact that ASG is cash poor (and they may be) - they are NOT going to lose money at the end of the day. They just are losing money in operating costs NOW.
  • So, in a nutshell, as I always say - you don't buy a non-NFL sports team (and even the NFL is getting less and less) in order to make money on an annual basis. You buy it for $200M in order to sell it for $$800M 15 to 20 years later. That should give some context for discussion on why we should be hopeful for getting an owner to buy our team who gets that.
The Bad:
  • So, since we know that the money is made on the back end and not annually, this does highlight the biggest issue for our ownership and it's not that we aren't spending money. It's that we aren't spending money WISELY. The main reason teams end up over the luxury tax is that they aren't spending all of their money wisely and yet are willing to spend more money to account for the mistakes being made. So, Rashard Lewis for $111M is a mistake, but going out and getting more pieces to go with him make up for that mistake. And this is done because 1) they want to win a title and 2) they know that they will recoup the money that was ill-conceived in the first place when the owners decide to sell the team.
  • This is leads to another bad outcome and that's that - you can't sell a team for $450M and make the player's union believe that the league is hemorrhaging money. The player contracts and the value of the teams are not in sync with - we're too poor to sustain this model. So, if I'm a player, we're going to have to have a work stoppage (Note: this presumes that as a player I've saved my money well and am able to live for a year or two without a paycheck vs. owners who don't even eat off of the money made or lost by their teams. Since we know that too many players are NOT that financially savvy, the owners still have a bargaining chip that is easy to chomp on.) Anyway, if the players are smart, they won't allow owners to simply scream about operating expenses. That's NOT how owners make their money. If they want to scream about expenses, then you can't go over your own salary cap and pass out bad contracts at the same time. Either eat the contracts, spend more, and shut up about poverty or don't eat the contracts and allow your team to get worse before it gets better.
So, the moral of this story is hopefully there is an owner who sees the big picture in Atlanta and no, I'm not buying the poverty chants of owners (ours included) - it's just bad ownership, not cheap ownership that has caused us to mismanage our salary cap and is preventing us from moving for as a franchise. They are right to communicate that we spent money on pieces (such as Jamal Crawford, etc), but the problem is - as wonderful offensively that he is...that was still $9M not well spent. Mike Bibby and Marvin Williams' contracts are money not well spent. Spending $20M+ on Joe Johnson next year, much less for the following 5 is not money well spent WHEN you still need about 3 more quality pieces that you need to add to the roster. That's what's so funny about this Shaq for Marvin debate or anything else about adding pieces. We aren't 1 piece away - we are more than that away.



Jesse said...

Agreed. When do you think they will realize that spending money now and doing so wisely will increase the chances of success today which in turn leads to a higher selling point tomorrow when they are ready to sell?

Or maybe we are the fools and this has been the ASG's plan all along. It is entirely possible that this investement was simply a buy-low/sell-high process and they are doing exactly what they planned to do from the start. The Hawks were in a miserable state when the ASG formed and bought them. Getting the Hawks to a perrenial playoff team regardless of the means in which it happened is a perfect thing to do in order to sell the team at a high point. They make a reasonable profit and get to remove themselves of the responsibility of following through on the contracts in place or having to take the team to the next level. While they could have done things better to increase the selling point of this team, the economy falling out from under them not only in the pro-sports business, but also their original business ventures, has probably but them in a position to sell now and get the profit while it's there.

It's really not a bad move on their part if all of this is the case.

ATL_Hawk_Luv said...

True, I'm willing to say that maybe I'm the fool for thinking that every owner wants to win a title. That can EASILY explain all of this. Owners get perks we could only dream of - All Star games, NBA Finals, to be part of the club. Maybe that's the purpose and not really - hey, I want to win a title with this franchise.

And under that model, I'm definitely the fool. So, if this is all based on business - that's fine, but again - I go back to my point of ... don't lie to me. I'd rather you say nothing. Atlanta's not a media hound city where if you said nothing - things would be crazy. It actually explains why Billy Knight never said anything. I think if he was to tell the REAL story, we'd lose faith in the organization and that probably was the right move. I really believe that he left because he felt that he was being limited from making moves to help us win (Deron Williams drafting, Amara Stoudamire trade, firing Mike Woodson). I think that's the main reason he was no longer the GM.

If we were smart we'd be going after Kevin Pritchard or Rod Thorn right now to run this team.

Brad said...

Cross Miller off the list of possibilities....

This is getting to be more and more depressing of a Summer for the Hawks